In October of 2008, we saw U.S. same-store volumes decrease for the first time in the history of the modern payments era. We will likely continue to see same-store volumes decline until October of 2009, when the new paradigm is stamped onto our industry forever or at least for the foreseeable future. These decreases in volume are the result of the economic crisis and recession that our country has been in since the middle of last year. The effects of this crisis will have a long-lasting impact on our industry even after the economy recovers.
   Unemployment is north of 8% and consumer confidence is at an all-time low, resulting in a significant decrease in overall spending. Two of the long-term effects of this recession will be an increase in the consumer savings rate and a decrease in personal spending. As you can see by the blue lines in the chart, total consumer spending will be much lower than the levels we saw in the early and mid parts of this decade. The long-term effects on credit card spending will be even greater. Obviously, as spending decreases so does credit card usage, but there will be an even greater impact on the card issuing business as the economy rebounds. Anything that negatively impacts issuers negatively impacts acquirers and ISOs. The instability in the banking sector, driven originally by sub-prime loans, has permeated every area of the financial services industry. The result has been a credit market that has completely dried up. A difficult credit market on top of record levels of card charge-offs means limited credit available on cards. We have seen consumers' credit card lines reduced and in some cases even eliminated. In addition, Congress will pass the Credit Card Fair Fee Act in some form or another, which will eliminate many of the fees issuers have become accustomed to receiving. The elimination of these fees and the tightening of credit will make certain consumers "unworthy" of credit cards. The green lines in the chart show card spending and the area in yellow represents the card volume that will be completely removed from the system. Reduced card volume means less revenue per merchant for you and me.



   The new card processing paradigm is upon us. It means that efficiency and scale will be even more important. Merchants that used to do $20,000 a month in card volume may only do $15,000 or so. This will forever change the payback period and ROI on new sales, alter break-even models for new ISOs and sales reps and force acquirers to re-evaluate their ability to pay down debt. As you look to make your plans for the second half of 2009 and beyond, do not expect to see merchant volumes increase to the levels of 2006, 2007 and the first half of 2008. Re-evaluate your partnerships and sales strategies and make sure you have a plan in place to deal with the new paradigm in payments.

Greg Cohen is President of Moneris Solutions U.S., and manages all U.S. initiatives and operations for the company.
Mr. Cohen can be contacted at 847-240-6623 or via email at greg.cohen@moneris.com.